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Highlights of June 28 Press Conference on New Social Insurance Policy

Bao Danru, deputy director of Shanghai Human Resources and Social Security Bureau

Shanghai Evening Post:I’d like to ask two questions. First, are there any attached conditions for migrant workers to enjoy the social security benefits as urban employees, such as holding a permanent residential permit? Will the comprehensive insurance and township social insurance scheme be abolished? Second, why cannot migrant workers from rural areas enjoy the same benefits as migrant workers from urban areas? Thank you.

Bao Danru:No conditions are attached for migrant workers to enjoy the social security benefits. The requirement for residential permits is spelt out in relevant regulations. People should apply for a permit to be a legal resident of Shanghai. There is a misunderstanding about migrant workers. Migrant workers from rural areas who have employment in Shanghai will pay their social insurance at a low level and increase the level gradually according to the new policy. There is no change in their status and they can continue to pay a low insurance fee. But migrant workers who are urban residents in other towns or cities can join the city’s social insurance for urban employees.

Considering the financial burden of both enterprises and individuals, we will undergo a transition from a model based on insurance types to one based on individual income. At the moment, we stay with the three basic insurances (endowment insurance, medical insurance and unemployment insurance). When time is ripe, we will introduce more insurance types. Within a five-year period, we will raise their insurance payment to the same level as for urban employees. But we will offer preferential treatment to rural migrant workers during these five years.

We haven’t decided on the fate of the comprehensive insurance and the township social insurance scheme. Those who are qualified to join the social security system for urban workers should be drawn into the system according to the new rules. But some people will stay with their existing insurance schemes.

Jiefang Daily:Drawing migrant workers into the city’s endowment insurance will increase the labor cost of enterprises. How will it impact the city’s labor-intensive enterprises?

Bao Danru:We’ve spent quite some time, almost two months, studying the policy’s possible effects on labor costs. We invited experts from the Shanghai Academy of Social Sciences and Fudan University’s College of Public Administration to do a research on the subject. Eighteen local 18 districts conducted surveys on migrant workers who are covered by insurances. Each district interviewed at least 30 households in the research. Shanghai Federation of Trade Unions and Shanghai Enterprise Council also solicited ideas from employers, entrepreneurs and rural workers and reached the following conclusion:

First, labor costs will go up. Second, most enterprises are well prepared for the new policy. Third, some workers in low-skill, labor-intensive industries will be affected. As we consider it is our obligation to implement the national policy and laws, we designed a five-year transition period for enterprises to gradually absorb the added costs. We hope this work can proceed smoothly with our efforts.

Radio Shanghai:As we know that individuals who have joined the comprehensive insurance and township social insurance schemes don’t need to pay insurance themselves. Now they are required to pay part of it under the new regulation. These workers may feel that they are earning less. Will they become reluctant to join in the insurance program? Does the labor department have any measures to solve this problem?

Bao Danru:First of all, it’s everyone’s legal obligation to pay the social insurance. Without contribution, it’s impossible to enjoy the benefits of the city’s social security system, which combines rights with duties. The insurance payment may add to a worker’s burden. For minimum wage earners, their insurance will be all paid by their employers, so the new policy does not affect them. Migrant workers who earn more than 2,000 yuan (US$308) a month, for example, won’t pay a high rate during the transitional period, relieving them of financial burden in the beginning. Those who earn more than the minimum wage but less than 2,000 yuan a month will feel pinched.

However, we need such a system in the long run. After paying the insurance, a migrant worker will benefit from it whether he remains in Shanghai in the future or returns to his native home. According to the survey, most rural migrant workers are in favor of this new policy. This is a compulsive insurance system. Anyone who is employed with a legal labor contract has an obligation to pay the social insurance. We will implement this policy by law.